Solar May Equal Cost of Producing Coal Power by 2017 in India, KPMG Says

India, Asia’s third-largest energy consumer, may be able to produce electricity from the sun as cheaply as from coal and other fossil fuel-based power plants by 2017, according to KPMG LLP.

India may install three times as much solar capacity as the government intends by 2022 if sun-powered electricity is able to match the cost of conventional power, a point referred to as grid parity, said KPMG’s Executive Director Santosh Kamath, lead author of a solar report to be released this week.

“We are heading for grid parity and it’s just a question of when,” Kamath, who heads the advisory firm’s India renewable energy practice, said in a phone interview. “In that scenario, the adoption of solar becomes entirely market-driven.”

India, which produces 71 percent of its electricity from coal, seeks to add 120,000 megawatts of power by 2017 to reduce blackouts threatening development in the world’s second-fastest growing major economy. Indian companies have announced about $7 billion of overseas energy acquisitions since January 2010 as they seek coal, uranium and other fuels, according to data compiled by Bloomberg.

Twice as Costly

Today, solar power costs more than twice as much as the 5.42 rupees per kilowatt-hour that it costs to deliver electricity to consumers, said KPMG which is advising Maharashtra State Power Generation Co. on a 125-megawatt solar power project.

The cost of fossil-fuel electricity may rise as much as 5.5 percent annually as India has to buy more expensive imported coal and replace aging plants, Kamath said. The country’s coal deficit may triple over the next five to seven years, a unit of Moody’s Investors Service said in a February report.

Solar power prices are projected to decline by 7 percent a year in the next decade on more efficient technologies and lower manufacturing costs, the report said.

If solar power becomes competitive with other sources, India could add 39,070 megawatts of grid-connected solar projects from 2017 and 2022, including residential rooftop panels and 18,455 megawatts of solar-powered telecommunication towers and agricultural water pumps, according to the report.

The government has set a target of installing 22,000 megawatts of solar power capacity by 2022.